How Does a Money Order Work?


Quick Answer

Money orders are available from the U.S. Postal Service, banks, credit unions or retailers like Western Union and Wal-Mart. The purchaser must have a debit card or cash on hand to buy a money order; money orders cannot be bought with credit cards or checks. Once the money order is issued, the purchaser fills out payment information on the order itself to designate payment to a specific person.

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Full Answer

A money order is a widely accepted alternative to checks. Money orders are considered more reliable than checks because they are backed by large agencies or corporations instead of individuals, says About.com. Since money orders cannot be purchased with credit or checks, they are considered guaranteed money. About.com recommends filling out a money order immediately after purchasing to protect against theft. Money orders can be replaced if lost or stolen, but issuers like USPS and Western Union charge fees for replacements.

Each money order includes a processing fee that is usually between 25 cents and $10, according to My Bank Tracker. Money orders can pay bills, rent and debts. Some hotels, car rental agencies and retail stores also accept money orders. Money orders are preferred by most corrections facilities, such as the Corrections Divisions of Riverside County, as a way to provide inmates with funds for use in prison commissaries.

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